The Hindu Business Line : Large deals on hold due to sub-prime crisis: Firstsource COO

Mumbai, May 29 In an interaction with Business Line, Mr Raju Venkatraman, Joint Managing Director and Chief Operating Officer, Firstsource Solutions, lists down his thoughts on the performance of the BPO industry and his company. Excerpts.

How has the sub-prime crisis and the following recession impacted Firstsource?

We are seeing instances of some outsourcing engagements getting postponed due to the uncertain economic environment facing clients. The $80-million Barclays deal that was supposed to start in early January, was pushed to March. (Earlier this year, Firstsource signed an outsourcing deal with Barclays Plc to operate the latter’s credit card customer care services.) Couple of large deals have been put on hold because of the lack of concrete decision making from the clients end. Decision-making has been hampered as many CEO’s and CFO’s losing jobs due to the liquidity crunch, especially in the US.

As a company, you are focused on the three verticals — financial services, telecom & communications and healthcare. Does this restrain you in any way?

In our industry, domain expertise is very important. From my own experience I can say that customers do not like to buy people on seats. They clearly want to know how you will help them on a specific process or a sub process. We are quite comfortable with our focus on three verticals. Having said that if there are emerging opportunities, we are open to it. As we have been doing a good job with the existing verticals, customers tell us that “you can do stuff like F&A”. However, currently we do not have anything planned.

The MedAssist acquisition for $330 million was considered by many investors to be overpriced. Do you think that Firstsource made this acquisition at the wrong time, considering how valuations globally have taken a beating?

There is no doubt that we would have got MedAssist for a cheaper price at this point. However, we would have found it very difficult to raise funds required for the acquisition, because of the liquidity crunch in the global markets.

It is said that some clients buy BPO services using procurement managers who used to buy office furniture and so a lot of deals go bad. Are we seeing any change in the scenario?

The procurement officer plays a very important role in the negotiation of any outsourcing contract. In several cases now, we are seeing that the procurement manager is now being made the P&L (profit and loss) owner. Of late, CEOs are asking procurement executives to manage the outsourcing operations, because they realise that outsourcing is strategic to their business. In such a scenario, the procurement manager starts thinking of results instead of merely negotiating the contract. Therefore, he will focus not only on cost but also on quality. We are seeing this happen in couple of engagements now and it is fantastic for both parties.

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